<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 1)
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
SPRINGHILL LAKE INVESTORS
LIMITED PARTNERSHIP
(Name of Subject Company)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
RICHARD J. MCCREADY, ESQ.
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
C/O THREE WINTHROP PROPERTIES, INC.
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(617) 330-8600
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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This Amendment No. 1 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9, dated February 1,
1995 (the "Schedule 14D-9") of Springhill Lake Investors Limited Partnership.
Capitalized terms used herein shall have the definitions set forth in the
Schedule 14D-9 unless otherwise provided herein.
ITEM 3. IDENTITY AND BACKGROUND AND ITEM 7. CERTAIN NEGOTIATIONS AND
TRANSACTIONS BY THE SUBJECT COMPANY
MEETING WITH LERNER'S REPRESENTATIVES HELD ON FEBRUARY 13, 1995
On February 13, 1995 representatives of the Purchaser and Three Winthrop
met with representatives of Lerner. The parties discussed the current status
of their respective offers to Limited Partners and possible different
outcomes. The Purchaser and Three Winthrop indicated a willingness to listen
to any suggestions which Lerner may have concerning the Partnership and the
proposals made to date by Lerner and the Purchaser, but did not offer any
specific proposals. Lerner's representatives indicated that Lerner intended
to continue with the consent solicitation process initiated by Lerner on
January 19, 1995. In addition, Lerner's representatives requested answers to
four specific questions: (i) what expense reimbursements Winthrop Management
intended to collect under its new management contract; (ii) whether Three
Winthrop would immediately seek the approval of the Partnership's mortgage
lender for Lerner's assumption of the existing mortgage loans; (iii) whether
Three Winthrop would permit Lerner to make a proposal to Limited Partners
consisting of an offer to purchase Units with an option to retain all or a
portion of their investment in the Project; and (iv) what was the highest
price that the Purchaser was willing to offer Limited Partners for their
Units. The Purchaser indicated that it was unwilling to answer question (iv).
With respect to the other three questions, Three Winthrop indicated that it
would provide a response the next day.
On February 14, 1995 a representative of Three Winthrop had a phone
conversation with a representative of Lerner. With respect to question (i),
Three Winthrop indicated that it would send a copy of the proposed form of
new management agreement to Lerner. A copy of that form is annexed hereto as
exhibit (c)(6). With respect to question (ii), Three Winthrop indicated that
it would defer making a decision on assisting Lerner in seeking the approval
of the Lender until after reviewing Lerner's revised proposal, particularly
since making an assumption request required the Partnership to deposit
$100,000 with the Lender. With respect to question (iii), Three Winthrop
asked for additional information as to what Lerner wanted Three Winthrop to
do. Lerner has yet to provide such additional information. On February 20,
1995, Three Winthrop received a letter from Greenbelt dated February 17, 1995
as a follow-up to the February 13 meeting. Three Winthrop responded to such
letter with a letter dated February 22, 1995. Such letters are attached
hereto as exhibits (c)(4) and (c)(5) and are incorporated herein by reference
in their entirety.
INQUIRIES FROM THIRD PARTIES REGARDING A POSSIBLE SALE OF THE PROJECT
On February 14, 1995 a representative of Three Winthrop responded to an
inquiry from a real estate broker who claimed that he had a client interested
in making an offer for the Project. On February 15, 1995 Three Winthrop sent
the broker a letter requesting information on the broker's client, to
determine if the client represented a qualified buyer for the Project. The
broker has yet to respond to Three Winthrop's request for information. On
February 21, 1995, a representative of Three Winthrop received a phone call
from a third party which claimed that it was interested in making an offer to
purchase the Project. Three Winthrop asked the third party to send a letter
of interest, which the third party has yet to do.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following documents are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- --------------- -------------------------------------------------------------------------------------------
<S> <C>
(c)(4) Letter to Three Winthrop Properties, Inc. from Greenbelt Residential Limited Partnership
dated February 17, 1995.
(c)(5) Letter to Greenbelt Residential Limited Partnership from Three Winthrop Properties, Inc.
dated February 22, 1995.
(c)(6) Form of Management Agreement between Winthrop Management and all of the Operating
Partnerships.
</TABLE>
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete
and correct.
SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP
By: Three Winthrop Properties, Inc.
Managing General Partner
By: /s/ Philip J. Brannigan, Jr.
- -----------------------------------------------------------------------------
Name: Philip J. Brannigan, Jr.
Title: Vice President
Date: February 22, 1995
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EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
EXHIBIT DESCRIPTION NUMBER
- ----------- ------------------------------------------------------------------------------ ----------
<S> <C> <C>
(c)(4) Letter to Three Winthrop Properties, Inc. from Greenbelt Residential Limited
Partnership dated February 17, 1995. ..........................................
(c)(5) Letter to Greenbelt Residential Limited Partnership from Three Winthrop
Properties, Inc. dated February 22, 1995. .....................................
(c)(6) Form of Management Agreement between Winthrop Management and all of the
Operating Partnerships.........................................................
</TABLE>
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GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
February 17, 1995
VIA FEDERAL EXPRESS
Mr. F.X. Jacoby
Three Winthrop Properties, Inc.
Winthrop Financial Associates
One International Place
Boston, Massachusetts 02110
Re: Springhill Lake
Dear F.X.:
This letter is intended as a follow-up to our meeting on Monday, February
13th, and our telephone conversation on February 14th regarding Springhill
Lake.
In our discussions, I raised the following questions, among others:
1. Whether Three Winthrop, as General Partner, would permit Greenbelt
Residential to make a tender offer to purchase limited partner interests in
the Springhill Lake Investor Limited Partnership. Allowing Greenbelt to bid
for limited partner interests on the same basis as your affiliate, Aquarius,
would be beneficial to limited partners because investor limited partners
would be permitted to remain as limited partners or to sell their interests.
This process would allow an "apples to apples" comparison of offers.
On the telephone, you asked what this permission would entail. Simply put,
Three Winthrop would cooperate and take all such reasonable steps as
necessary to amend the Partnership Agreement to allow Greenbelt to acquire
and vote limited partner interests.
2. I asked that you speak with the lender to confirm that the lender would
be prepared to allow, as required under the loan documents, an assumption of
the existing loans by Greenbelt Associates or another financially capable
third party who might be interested in purchasing the project. We are frankly
surprised that, given your fiduciary duty to the limited partners, you have
not undertaken this process. We are also at a loss to understand why you have
not approached other potential purchasers to see if they would be interested
in bidding on the project. Given the number of real estate investment trusts
who are actively pursuing apartment complexes and who might be able to
acquire the Project in a manner which would be tax-free to the limited
partners, we are surprised that Winthrop has not pursued this type of
transaction. Such a transaction might be of great interest to the Investor
Limited Partners and Mr. Lerner.
In our telephone conversation on February 14, you promised to discuss loan
assumption with the lender after you received the revised Greenbelt offer.
Enclosed is the offer as set forth in our February 13th letter to the
Investor Limited Partners, together with revised pages of our Partnership
Interest Purchase Agreement.
3. We have urged Three Winthrop to consider a competitive bidding process
for management. We asked that you advise us of the precise expenses which
will be borne by the Winthrop affiliate under its proposed new management
agreements. Based on our telephone conversation, I understand that you have
sent us a mark-up of the Management Agreement which is an attachment to the
loan documents. I have not yet received that document.
4. Despite our requests, we were unaware of the cash reserves of $3.2
million. Do we now have all of the relevant information regarding the
partnership, including cash reserves and escrows?
As discussed, given the March 2, 1995 deadline for your tender offer, we
would appreciate an immediate response to these matters.
Sincerely,
Edward L. Cohen
Enclosures
cc: George E. Covucci, Esq.
<PAGE>
GREENBELT RESIDENTIAL LIMITED PARTNERSHIP
February 13, 1995
Dear Springhill Lake Investors Limited Partner:
We warned you not to sell your units in response to the Winthrop/Aquarius
Offer. By now you know why--Winthrop is using cash reserves that already
belong to you to force you either to sell your units at a price fixed by
Winthrop or remain as a minority limited partner in a partnership in which
you will have few rights. DON'T ACCEPT WINTHROP'S "TAKE IT OR LEAVE IT" OFFER
WHEN WE ARE OFFERING YOU A BETTER ALTERNATIVE.
Now that Winthrop finally has provided the financial information that we
have been seeking for over two months, WE HAVE REVISED OUR OFFER TO MAKE
AVAILABLE TO YOU AT LEAST $36,400--more than Aquarius is offering to pay you.
EVEN MORE IMPORTANTLY, IF YOU JOIN WITH US AND VOTE TO CAUSE A SALE OF THE
PROJECT, YOU COULD RECEIVE MORE. Our offer establishes the minimum amount you
will receive if you vote with us. UNDER THE WINTHROP/AQUARIUS OFFER, YOU WILL
NOT RECEIVE MORE THAN $36,000. UNDER OUR OFFER, YOU WILL NOT RECEIVE LESS
THAN $36,400. In addition, if you vote to dissolve the Partnership and to
have the Project sold, we would demand that Winthrop, as a fiduciary,
cooperate in structuring the transfer in a manner that would allow limited
partners who wish to remain in the Partnership to do so. As the successful
purchaser, we would welcome the opportunity to have any of you remain as our
partners.
BECAUSE OUR PROPOSAL GIVES YOU AN OPPORTUNITY TO MAXIMIZE THE RETURN ON
YOUR INVESTMENT, WE URGE YOU TO SIGN AND RETURN THE GREEN CONSENT CARD NOW.
THAT STEP WILL TELL WINTHROP YOU WANT THE PROJECT SOLD NOW AT THE BEST
AVAILABLE PRICE.
Please carefully consider the following:
OUR OFFER PROVIDES YOU WITH MORE CASH
Here is how our revised offer works:
o With the cash reserves of approximately $3.2 million (we just learned
about the size of those reserves from the Winthrop/Aquarius Offer), our
original offer totaled approximately $35,100 per unit. CONTRARY TO WHAT
WINTHROP IS TELLING YOU, THOSE CASH RESERVES BELONG TO YOU AND UNDER OUR
OFFER WILL BE DISTRIBUTED IN CONNECTION WITH THE DISSOLUTION.
o We are willing to add another $843,700 (approximately $1,300 per
investor unit) to our offer--making it worth at least $36,400 per unit to
you.
UNLOCK THE MOST VALUE POSSIBLE FROM YOUR INVESTMENT
The increase in our offer is not the only reason you should vote with
us--a sale of the Project will unlock the most value possible from your
investment.
Consider these facts:
o OUR RESOLUTION PLACES NO CAP ON YOUR RETURN. We have offered what we
believe to be a fair price for the Project. Your vote gives you the
opportunity to receive even more.
o OUR RESOLUTION CALLS ON WINTHROP TO DETERMINE WHAT VALUE THE MARKET
PLACES ON THE PROJECT. If a majority of you want the Project to be sold now,
Winthrop, as the general partner, will have a duty to assist in that process
and find the highest bidder for the Project.
o THE WINTHROP/AQUARIUS OFFER LIMITS THE CASH YOU CAN RECEIVE. The
Winthrop/Aquarius offer caps the amount that you can receive at $36,000 per
unit.
WINTHROP'S CONFLICT OF INTEREST
Ever since we first told you about our offer, we have expressed serious
misgivings about the conflict of interest that Winthrop has in evaluating any
transaction in which Winthrop would lose its rich fees, despite the value to
you.
2
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Consider what has happened in the more than two months since we submitted
our offer:
o We asked Winthrop to consider our offer and negotiate in good faith.
WINTHROP HAS NOT.
o We asked Winthrop to seek other third party offers and test the value
of the Project in the open market. WINTHROP HAS NOT.
o We asked Winthrop to obtain the consent of the Project's lender to our
assumption of the mortgage. WINTHROP HAS NOT.
Instead, an affiliate of Winthrop has offered to purchase your interests,
without negotiating, without competitive bidding, and without any attempt to
find the real value of your investment. WINTHROP WILL NOT EVEN TELL YOU
WHETHER IT BELIEVES THAT THE PRICE BEING OFFERED IS FAIR. What we believe is
clearly unfair is for Winthrop to be allowed to take control of the
Partnership and award itself annual fees of $1,000,000 in addition to the
more than $15,000,000 in fees it has already taken.
THE WINTHROP/AQUARIUS OFFER--SERIOUS SHORT-COMINGS
Compare our proposal to some of the serious short-comings of the
Winthrop/Aquarius Offer:
o IT FAILS TO REQUIRE THREE WINTHROP TO SEEK THE BEST PRICE AVAILABLE. We
have proposed only that you vote to dissolve the Partnership and allow the
market to determine the value of the Project.
o IT SUGGESTS A FLEXIBILITY THAT DOES NOT REALLY EXIST. The
Winthrop/Aquarius Offer suggests that you may choose to sell your interest or
remain as a limited partner. The Winthrop/Aquarius Offer does not highlight
that upon obtaining control, Aquarius will be able to veto all decisions that
you are currently entitled to make. In effect, Winthrop is making a "take it
or leave it" offer.
o IT PERMITS WINTHROP AND ITS RELATED PARTIES TO INCREASE THEIR ALREADY
RICH FEES. A Winthrop affiliate will take over as managing agent for the
Project at a 3% fee, plus an unspecified "expense" reimbursement. Combined
with the "oversight" and other fees already received from the Project,
Winthrop will siphon off $1,000,000 each year in fees--approximately $1,540
per unit. This is in addition to the more than $24,000 per unit of fees that
Winthrop has already pocketed from the Project. Winthrop's statement of its
intent to appoint itself as managing agent resulted in two limited partners
of the Partnership, together with Mr. Lerner, filing a lawsuit against Three
Winthrop in Maryland state court on February 7, 1995. The lawsuit alleges
that Three Winthrop's actions in this regard constitute a breach of its
fiduciary duty to you and to Mr. Lerner.
o IT ANTICIPATES ENDING WITH A PRIVATE PARTNERSHIP. While not highlighted
in the Winthrop/Aquarius Offer, its success would result in the Partnership's
not having to be regulated by the Securities and Exchange Commission. As a
result, limited partners who elected to stay in the Partnership would have
only limited access to information and would not continue to receive even the
reports currently being received.
We believe Winthrop's message to you is clear. ACCEPT ITS MAXIMUM PER UNIT
OFFER OR FACE AN UNCERTAIN FUTURE IN A PARTNERSHIP IN WHICH YOU HAVE FEW
RIGHTS AND LITTLE INFORMATION. MEANWHILE, WINTHROP WILL CONTINUE INDEFINITELY
TO TAKE ITS RICH FEES.
LEVEL THE PLAYING FIELD
We recognize that this flurry of information from us and Winthrop might be
confusing. The cause of this confusion is that Winthrop is taking advantage
of the fact that the playing field is not level. Winthrop has all of the
information--we do not. In addition, we were forced to structure our offer as
a purchase of Partnership assets rather than of your interest because the
Partnership agreement precludes us from purchasing your interest. OUR GOAL IS
TO PROVIDE YOU WITH THE MAXIMUM RETURN AND AFFORD YOU THE FLEXIBILITY YOU
DESIRE--WINTHROP'S GOAL IS TO MAXIMIZE ITS OWN RETURN AND TO FORCE YOU OUT OF
THE PARTNERSHIP WITH A "TAKE IT OR LEAVE IT" OFFER.
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IMPORTANT
CONTRARY TO WHAT WINTHROP HAS TOLD YOU, YOU DO NOT HAVE TO WAIT UNTIL MARCH
7TH TO GIVE US YOUR VOTE. IF A MAJORITY OF YOU APPROVE OUR RESOLUTION PRIOR
TO THAT DATE, SUBJECT TO WORKING OUT MATTERS WITH THE LENDER, THE RESOLUTION
WILL BE ADOPTED. WE URGE YOU NOT TO TENDER ANY UNITS TO WINTHROP IN RESPONSE
TO THE WINTHROP/AQUARIUS OFFER. WE URGE YOU TO SIGN AND RETURN THE GREEN
CONSENT CARD NOW.
We urge you to read this letter together with our Consent Solicitation
Statement dated January 19, 1995. If you have any questions regarding this
information, or would like to discuss our revised offer or the
Winthrop/Aquarius Offer, please contact either Ted Lerner, Ed Cohen or Bob
Tanenbaum at (301) 984-1500 or, toll free, at 1-800-953-7637.
Very truly yours,
GREENBELT RESIDENTIAL LIMITED
PARTNERSHIP
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NON-IMPUTATION ENDORSEMENT. ALTA Form Non-Imputation Endorsement to the
Title Insurance Policies to be issued at closing under this Agreement
insuring that coverage under the Title Insurance Policies will not be denied
on the ground that the knowledge of Seller prior to the Closing Date is
imputed to Purchaser.
OPERATING PARTNERSHIP(S). The Maryland limited partnerships known as First
Springhill Lake Limited Partnership, Second Springhill Lake Limited
Partnership, Third Springhill Lake Limited Partnership, Fourth Springhill
Lake Limited Partnership, Fifth Springhill Lake Limited Partnership, Sixth
Springhill Lake Limited Partnership, Seventh Springhill Lake Limited
Partnership, Eighth Springhill Lake Limited Partnership, Ninth Springhill
Lake Limited Partnership and Springhill Commercial Limited Partnership, or
any one of them, as the context may require.
PARTNERSHIP AGREEMENT(S). Collectively, the limited partnership agreements
of the Operating Partnerships, as amended (or amended and restated) through
the date of this Agreement, or any one of them, as the context may require.
PARTNERSHIP AMENDMENT(S). Those amendments to the Partnership Agreements
described in Section 5.b. hereof.
PARTNERSHIP INTEREST. Collectively, the general partner interest in each
of the Operating Partnerships, representing in each a ninety percent (90%)
ownership interest therein.
PERMITS. Those permits and licenses issued with respect to the Project
described on Exhibit C attached hereto and made a part hereof.
PERMITTED ENCUMBRANCES. Those matters affecting title to the Project
described on Exhibit D attached hereto and made a part hereof.
PROJECT. Together, that certain 96-building, 2,899-unit garden apartment
complex known as Springhill Lake Apartments and a commercial facility owned
by Springhill Commercial Limited Partnership, located on approximately 154.1
acres of land in Greenbelt, Prince George's County, Maryland and owned by the
Operating Partnerships.
PURCHASE PRICE. The purchase price for the Partnership Interest payable by
Purchaser to Seller pursuant to Section 3 of this Agreement.
PURCHASER. Greenbelt Residential Limited Partnership, a Maryland limited
partnership.
TITLE INSURANCE POLICIES. Those owner's policies of title insurance issued
by Lawyers' Title Insurance Corporation, or such other reputable title
insurance company which may be retained in connection with the transactions
contemplated herein, insuring the Operating Partnerships' title to the
Project.
2. AGREEMENT TO SELL AND PURCHASE. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, the Partnership Interest on the
terms and conditions hereinafter set forth.
3. PURCHASE PRICE AND TERMS. The aggregate Purchase Price for the
Partnership Interest shall be equal to the sum of (i) Twenty Million Six
Hundred Forty-One Thousand Four Hundred Seventy-Eight Dollars ($20,641,478)
and (ii) the amount of the Loan Transfer Fee. The Purchase Price shall be
payable as follows:
a. DEPOSIT.
(1) AMOUNT. Within three (3) business days after full execution of
this Agreement, Purchaser shall deposit in escrow with the Escrow Agent
the Deposit in the amount of Five Hundred Thousand Dollars ($500,000) by
cash, certified or cashier's check or wire transfer of federal funds.
Escrow Agent shall invest the Deposit in such accounts insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation in the Washington, D.C. metropolitan area, or in
such obligations issued or insured by the United States government, as
Purchaser may select and Seller may approve, such approval not to be
unreasonably withheld, conditioned or delayed. All interest earned on the
Deposit shall be and become part of the Deposit.
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(2) RELEASE OF DEPOSIT. Escrow Agent shall release the Deposit to the
Seller upon the earlier to occur of (i) full settlement of the purchase
and sale of the Partnership Interest pursuant to this Agreement, or (ii)
receipt from Seller of written notice ("Default Notice") that Purchaser
has defaulted under this Agreement beyond expiration of any cure period
expressly permitted under this Agreement, unless Purchaser, within five
(5) days of receipt of written notice of Seller's Default Notice, objects.
Until its actual receipt by the Seller, Seller shall bear no risk for the
loss of all or any part of the Deposit.
b. CASH AT CLOSING. At closing hereunder, Purchaser shall pay in cash,
certified or cashier's check or wire transfer of federal funds to the
Seller the balance of the Purchase Price as adjusted pursuant to the terms
hereof, of which sum the Deposit shall be a part.
c. ASSUMPTION OF MORTGAGE LOAN. Upon payment of the Loan Transfer Fee,
and subject to obtaining the consent of the Lender, Purchaser shall assume
the obligations of Seller under the Mortgage Loan and shall be fully
substituted for Seller thereunder.
4. TITLE.
a. TO PARTNERSHIP INTEREST. At closing hereunder, the Partnership
Interest shall be free and clear of any and all liens, defects,
encumbrances and pledges, subject only to the terms and conditions of this
Agreement and the Partnership Agreement.
b. TO PROJECT. At closing hereunder, the Operating Partnerships' title
to the Project shall be good and marketable and insurable as such in an
amount not less than the sum of (i) the Purchase Price, as adjusted upward
to reflect the partnership interest in Seller owned by Lerner, plus (ii)
the principal amount of the Mortgage Loan, free and clear of any and all
liens, defects, encumbrances, pledges and subleases, easements, covenants,
restrictions or other matters whatsoever, whether recorded or unrecorded,
except for (i) the lien of real estate taxes, water rents and sewer
charges not yet due and payable, (ii) the Leases, and (iii) the Permitted
Encumbrances.
5. CLOSING.
a. TIME AND PLACE. Closing under this Agreement shall be held on the
date which is fifteen (15) days after the Investment Approval Date, or on
such earlier date as Purchaser may designate by at least ten (10) days
prior written notice to Seller. Closing shall be held at the offices
Arnold & Porter, 1200
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February 22, 1995
Mr. Edward L. Cohen
Greenbelt Residential Limited Partnership
11501 Huff Court
North Bethesda, MD 20895
Re: Springhill Lake Apartments
(the "Project")
Dear Ed:
Provided below are answers to the four questions raised in your letter
dated February 17, 1995.
1. As you know, Three Winthrop, as general partner, does not have the
power to amend the partnership agreement to permit you to make a tender
offer to purchase limited partnership interests or to permit any
other action which is currently prohibited by the partnership agreement.
Such an amendment would require the consent of at least a majority of the
limited partners. You could have sought such consent in your currently
pending consent solicitation but did not. You are still free to seek such
consent in a new consent solicitation. You should note that if a majority
of the limited partners in fact did consent in writing to effect an
amendment such as that proposed by you, Three Winthrop would seriously
consider, consistent with its fiduciary duty, whether to consent
thereto. You should also note that whether or not any such amendment were
to become effective, Three Winthrop would not agree to resign as the
general partner of the Partnership and, if removed as general partner,
would not (unless legally required to do so) consent to the substitution
of any entity affiliated with you to become the general partner.
2. It would be inconsistent with our fiduciary duties and the
partnership's existing contractual relationships to expend assets of the
partnership to cause the partnership's mortgage lender to take actions and
incur out-of-pocket expenses (which would be paid by the partnership under
the loan documents) in respect of a possible transaction which may
never occur. For this reason we have determined that it would not be in
the best interest of the partnership to approach the lender unless and
until it is determined that the Project should be sold and that your offer
is the highest and best offer in respect of the Project and that all
conditions precedent to your offer (other than lender approval) have been
satisfied or waived. If and when we make this determination, we will, of
course, take all actions within our power to cause the lender to review
your application and give you all due consideration to assume the mortgage
indebtedness in respect of the Project.
With respect to third parties who might be interested in purchasing
the Project, Three Winthrop cannot make a valid assumption request to the
lender until the identity and financial capabilities of the bidder is
known. If the Partnership were to pay the fees necessary to cause the
lender to pre-approve all bidders in respect of the Project, the cost
would be substantial and, we believe, the mortgage lender might become
unwilling to cooperate with us in the future.
3. There is no need to engage in competitive bidding to arrive at a
fair and reasonable management arrangement in respect of the Project. As
experienced property managers in the DC area, you and we are each aware of
the market value of management services in that area. The proposed
management agreement with Winthrop Management has been approved by the
lender, and Three Winthrop believes that the compensation arrangements
specified in such agreement are fair and reasonable and consistent with
the amounts charged by other unaffiliated managers of similar properties.
For your information, I am enclosing a copy of the approved form of
management agreement.
Three Winthrop will provide you with a description of the precise
expenses which will be reimbursable to Winthrop Management under the
management agreement once Winthrop Management has reviewed the payroll and
other relevant expense records of the Lerner Corporation with respect to
the Project, and determined how a possible change in management will
impact the Project's operations.
<PAGE>
4. The reserve and escrow balances listed in Aquarius' Offer to
Purchase dated February 1, 1995 are correct as of January 1, 1995, to the
best of Three Winthrop's knowledge. You may wish to review the financial
information which Three Winthrop already sends you on a regular monthly
basis and which the Partnership files with the SEC on a regular quarterly
basis to confirm that this meets your information needs.
I would like to take this opportunity to make certain that the record is
clear on certain of the matters stated in your correspondence to the limited
partners. First, contrary to statements made by you to limited partners, at
no time prior to your letter dated February 17, 1995 did you request Three
Winthrop to market the Project to third parties and, in fact, prior to your
letter to limited partners dated February 3, 1995, you had urged the
partnership to sell the Project to you without competitive bidding. Second,
contrary to statements made by you to limited partners, you have never
attempted to obtain information on the partnership's escrows or reserves from
Three Winthrop prior to your letter dated February 17, 1995.
We have consistently fulfilled our fiduciary and other obligations to you
and the other investors in the Project. In doing so, we have endeavored at
all times to provide complete and truthful information to all interested
partners. You have not in your cummunications to investors. You have instead
attempted through groundless litigation and factual distortion to portray Three
Winthrop in a negative light. You should note that we reserve any and all of our
rights against you relating to such acts, including seeking redress for such
acts in an appropriate forum and at an appropriate time.
Very truly yours,
F.X. Jacoby
MANAGEMENT AGREEMENT
PARTIES In consideration of the covenants herein contained, First Springhill
Lake Limited Partnership, Second Springhill Lake Limited Partnership,
Third Springhill Lake Limited Partnership, Fourth Springhill Lake
Limited Partnership, Fifth Springhill Lake Limited Partnership, Sixth
Springhill Lake Limited Partnership, Seventh Springhill Lake Limited
Partnership, Eighth Springhill Lake Limited Partnership and Ninth
Springhill Lake Limited Partnership and Springhill Commercial Limited
Partnership, all Maryland limited partnerships, and Springfield
Facilities, Inc., a Maryland corporation (collectively and hereinafter
called the "Owner") and Winthrop Management, a Massachusetts general
partnership (hereinafter called the "Agent"), agree as follows:
EXCLUSIVE 1. The Owner hereby employs the Agent exclusively to rent,
AGENT lease, operate and manage the property known as Springhill Lake
Apartments ("Apartments") and the neighborhood shopping center,
containing approximately 22,000 square feet of retail and office
space and known as the Springhill Lake Shopping Center and the
parcel of land owned by Springhill Commercial Limited Partnership
known as the Early Learning Center ("Shopping Center"), (both of
which are located in Prince George's County, Maryland and
collectively referred to as the "Property") upon the terms
hereinafter set forth. The initial term of this Agreement shall
commence as of the date hereof and, unless sooner terminated as
provided herein, shall continue until December 31, 1996. This
Agreement shall thereafter be renewed for successive one-year
terms unless sooner terminated as provided herein or unless on or
before 60 days prior to the expiration of the initial term or any
extended term Owner gives notice of its intention not to renew
this Agreement.
2. The Agent accepts the employment and agrees:
AGENT TO a) To use due diligence in the management of the premises
FURNISH for the period and upon the terms herein provided, and
SERVICES agrees to furnish services for the renting, leasing, operating
and managing of the Property.
MONTHLY b) To render monthly statements of receipts, expenses and
STATEMENTS charges and to account to Owner for receipts and dis-
bursements. In the event the disbursements are in excess of
the rents collected by the Agent, the Owner hereby agrees to
pay such excess promptly upon demand of the Agent. Agent
shall keep and maintain in its possession copies of all
invoices, purchase orders, operating statements, rent rolls,
occupancy reports, and other records and written material
relating to the property for a period of six (6) years from the
date of preparation or receipt of such documents. After a
period of six (6) years Agent shall dispose of such documents
unless Owner specifically requests Agent to send the
documents to Owner.
SEPARATE c) To establish a separate account known as the Springhill
OWNERS' Operating (and/or Reserve) Account, separate and apart
FUNDS from Agent's corporate accounts, for the deposit of receipts
collected as described herein, in a bank or other institution
whose deposits are insured by the federal government. Such
depository shall be selected by the Agent. However, Agent
shall not be held liable in the event of bankruptcy or failure
of a depository. Funds in the Operating (and/or Reserve)
Account shall remain the property of Owner subject to dis-
bursement of expenses by Agent as described in this
Agreement.
BONDED d) To obtain for the Property's on-site employees who
EMPLOYEES handle or are responsible for Owner's monies a fidelity bond
or comprehensive crime insurance, in amounts not less than
$500,000, the cost of which shall be an expense of the Pro-
perty. Off-site employees of Agent who handle or are
responsible for the Owner's monies shall also be bonded by a
fidelity bond or otherwise covered by comprehensive crime
insurance in amounts not less than $500,000, the cost of
which shall be an expense of the Agent.
3. The Owner hereby gives to the Agent the following authority and
powers and agrees to assume the expenses in connection therewith:
COMPLIANCE a) To carry out its services hereunder in full compliance
WITH APPLIC- with all applicable statutes, ordinances, laws and
ABLE LAWS regulations and not to knowingly permit the Property to
AND AGREEMENTS be used for any purpose which might void or violate any
2
policy of insurance or mortgage relating to the Property.
Agent shall notify the Owner promptly, or forward to the
Owner promptly, any material complaints, warnings, notices,
or summonses received by it relating to statutes, ordinances,
laws and regulations. The Owner represents that to the best
of its knowledge the Property complies with all such
requirements, and authorizes the Agent to disclose the owner-
ship of the Property to any relevant officials or authorities.
ADVERTISING b) To advertise the availability for rental of the Property
AND SIGNS or any part thereof, and to display signs thereon; to sign as
agent for Owner, and/or cancel leases for the Property or any
part thereof; to collect rents and other charges due or to
become due and give receipts therefore, to terminate
tenancies and to sign and serve in the name of the Owner
COLLECTION such notices as are deemed necessary by Agent, to institute
OF RENT and prosecute actions, to evict residents and to recover
possession of the property; to sue for in the name of the
LEGAL Owner and recover rents and other sums due; and when
PROCEDURES expedient, to settle, compromise and release such actions or
suits or reinstate such tenancies.
REPAIRS c) To make all necessary repairs provided the cost of any single
repair does not exceed the sum of $10,000 unless such repair
is specifically authorized in an (approved) budget for the
current year, such repair is authorized by Owner or such
repair is an emergency and Agent promptly notifies Owner of
such emergency repair.
EMPLOYEES d) To hire, discharge and supervise all labor and employees
required for the operation and maintenance of the Property;
it being agreed that all employees shall be deemed employees
of the Agent. Owner shall have no right to hire, supervise
or direct such employees. Owner shall have the right to
request Agent to discharge or remove from employment at the
Property such employees as Owner deems unsatisfactory. Owner
shall specify to the Agent its reasons for requesting the
discharge. If Agent fails to discharge the employee and if,
after a reasonable amount of time, Owner determines that
such employee's performance continues to be unsatisfactory,
Owner may request Agent to discharge such employee. Agent
shall establish the salaries, wages and other compensation
for such employees, including customary employee benefits,
which need not be approved by Owner if consistent with an
3
(approved) budget. For all on-site employees, such wages and
other compensation shall be the expense of Owner. For off-
site employees who have responsibilities over the Property,
Owner and Agent shall agree on the percentage, if any, of
such wages and compensation which shall be an expense of
Owner. Manager shall fully comply with all applicable laws
and regulations relating to workmen's compensation, social
security, employment insurance, hours of labor, wages, work-
ing conditions, and other employer/employee related subjects.
SERVICE e) To contract on behalf of Owner for electricity, gas,
CONTRACTS fuel, water, telephone, rubbish hauling and other services or
such of them as Agent shall deem advisable. It is agreed that
Agent shall execute such contracts as agent for the Owner.
The Agent shall not contract for any services not in an
(approved) budget for the current year whose estimated cost
would exceed $10,000 without the Owner's prior written
consent.
SAVE 4. The Owner and Agent further agree:
HARMLESS
a) Agent shall indemnify, defend and hold Owner harmless from
any and all claims, demands, causes of action, losses,
damages, fines, penalties, liabilities, costs and expenses,
including attorney's fees and court costs (but only in excess
of amounts actually received by Owner from any insurance
proceeds), sustained or incurred by or asserted against Owner
arising out of Agent's breach of the duties and obligations
required by this Agreement or any criminal acts, gross negli-
gence or willful misconduct.
Owner shall indemnify, defend and hold harmless Agent from
any and all claims, demands, causes of action, losses,
damages, fines, penalties, liabilities, costs and expenses,
including attorneys' fees and court costs (but only in excess
of amounts actually received by Agent), sustained or incurred
by or asserted against Agent in connection with Agent's
carrying out the provisions of the Agreement in compliance
therewith or acting under the express direction of Owner,
unless such claims, demands, causes of action, losses,
damages, fines, penalties, liabilities, costs or expenses
arising out of Agent's criminal misconduct, willful
misconduct or gross negligence.
4
b) Agent shall not be liable to Owner for any violations of
statutes, ordinances, laws or regulations relating to the
renting, leasing, operation or management of the Property
so long as Agent acted in good faith hereunder and in the
best interest of the Property or under the express direction
of Owner and its course of conduct did not constitute gross
negligence, willful misconduct or criminal activity.
c) Owner shall pay all expenses incurred by the Agent including
without limitation attorneys' fees for counsel employed to
represent the Agent or the Owner in any proceeding or suit
involving an alleged violation by the Agent or the Owner, or
both, of any statute, ordinance, law or regulation of any
governmental body pertaining to the leasing, rental, manage-
ment and operation of the Property (unless the Agent is
finally adjudicated to have personally and not in a repre-
sentative capacity violated such constitutional provision,
statute, ordinance, law or regulation).
INSURANCE d) (i) Owner's Insurance. The Owner or Agent, if Agent is directed
by Owner, at the expense of the Property, shall procure and
maintain at all times during the term of this Agreement at least
the following insurance: (A) "All Risk" insurance on all real
and personal property at the project including boiler and
machinery and Agent's furniture, furnishings, or fixtures
situated at the Property in an amount not less than the
replacement cost; (B) Comprehensive General Liability Insurance
written on an occurrence basis, to afford protection of
$10,000,000 combined single limit for bodily injury and/or death
arising therefrom and Broad Form property damage arising out of
any one occurrence; and which insurance shall include coverage
for contractual liability, independent contractor's liability
and completed operations liability; and (C) Comprehensive
Automobile Liability, covering owned, non-owned, and hired
vehicles providing bodily injury and property damage coverage,
all on a per-occurrence basis, at a combined single limit of
$1,000,000.
Agent shall be named as an additional named insured with
respect to the liability insurance.
(ii) Agent's Insurance. Agent shall procure and maintain at
all times during the term of this Agreement (A) Compensation
5
Insurance providing statutory benefits for employees and (B)
Employer's Liability Coverage in an amount not less than
$500,000. The cost of this insurance shall be an expense of
the Property for all on-site employees and for an agreed to
portion of insurance for off-site employees.
INTEREST, TAX
AND INSURANCE
PAYMENTS e)The Agent is hereby instructed and authorized to
pay mortgage indebtedness, property and employee taxes,
special assessments and insurance premiums, and the Agent
is hereby directed to accrue and pay for same from the
Owner's funds, with the following exceptions:
None
OWNER f) In the event the Agent advances funds for the Owner's
LIABILITY account or the Owner is indebted to the Agent for services or
otherwise arising out of this Agreement, all monies advanced
by the Agent shall be due and payable by the Owner upon
demand and shall bear interest at the prime rate charged by
BayBank Boston, plus one percent computed on monthly debit
balances on the Owner's account and the recording of this
Agreement or notice with a notation of the amount owing the
Agent shall become a valid lien upon the premises. At the
election of the Agent, and upon notice to the Owner, the
Agent may satisfy any advances made by the Agent, together
with the interest due thereon, from the gross revenue of the
Property.
AGENT'S g) To pay the agent each month:
COMPENSATION
(1) For Management:
3% of gross Property revenues
other than the Shopping Center
(2) For Leasing:
N/A
6
(3) For Supervision of Construction/ Improvements:
N/A
(4) Other:
5% leasing fee on Shopping Center space
is payable as rent is collected from tenants.
Such amount will be shared with outside
brokers to the extent that such brokers are
involved in procuring such tenant.
No fee shall be paid with respect to rent
payable by a tenant for the period after the
tenth anniversary of the date on which such
tenant initially occupies the part of
the Shopping Center leased by it.
RIGHT OF h) The Agent shall have the right to assign all of
ASSIGNMENT its right, title and interest and all obligations
under this Management Agreement to an affiliated
entity, so long as such entity has the same
degree of experience and expertise in the
management of multi-family properties as does
Winthrop Management, and so long as essentially
the same resources and personnel will continue to
be utilized in connection with the management of
the Property.
TERMINATION i) Agent may terminate this Agreement at any time
upon thirty (30) days' written notice to Owner.
Agent or Owner may terminate this Agreement upon
ten (10) days' written notice for any default in
the performance of Owner's or Manager's
obligations under this Agreement which default
remains uncured following reasonable notice of
such default.
Dissolution or termination of the corporate or
partnership existence of Agent by merger,
consolidation or otherwise which result in a
change of control; or cessation on Agent's
part to continue to do business, or bankruptcy,
reorganization or reconstitution of Agent, or
insolvency, or assignment for the benefit of the
creditors of Agent shall effect an immediate
termination of the Agreement without notice. In
addition, a sale of the Property whether by Owner
or pursuant to a foreclosure action by creditors
of Owner or pursuant to a conveyance in lieu of
foreclosure, the destruction of the Property
so that the Property is untenantable or the
taking of the Property shall effect an immediate
termination of this Agreement without notice.
7
NON-RECOURSE j) None of the (i) partners of Owner or Agent, (ii)
partners of the partners of Owner or Agent, or
(iii) any legal representative, heir, estate,
successor or assign of those in (i) or
(ii) above shall have any personal obligations
with respect to the obligations of Owner or Agent
hereunder; recourse against Owner shall be
limited to the estate of Owner in the Property
or the proceeds of any sale of all or a portion
of Owner's interest in the Property; and recourse
against the Agent shall be limited to the assets
of the Agent.
The indemnities contained in this Agreement shall survive the termination of
this Agreement whether such termination is for cause or without cause. This
Agreement shall be binding upon the successors and assigns of the Agent and the
Owner.
IN WITNESS WHEREOF, the parties hereto have affixed or caused to be affixed
their respective signatures as of this day of ,
1995.
AGENT:
WINTHROP MANAGEMENT
By:______________________
Vice President
OWNER:
FIRST SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
8
SECOND SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
THIRD SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
FOURTH SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
FIFTH SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
9
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
SIXTH SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
SEVENTH SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
EIGHTH SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
10
NINTH SPRINGHILL LAKE LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
SPRINGHILL COMMERCIAL LIMITED PARTNERSHIP
By: SPRINGHILL LAKE INVESTORS LIMITED
PARTNERSHIP, General Partner
By: THREE WINTHROP PROPERTIES, INC.,
Managing General Partner
By:_________________________
Vice President
SPRINGFIELD FACILITIES, INC.
By:_________________________
Vice President
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